HM Revenue & Customs (HMRC) has increased the interest rate applied to late tax payments following the latest hike in the Bank of England base rate.
The late payment interest rate increased to 4.25 per cent from 23 August – the highest rate since the height of the financial crisis in January 2009.
It will put further pressure on those struggling to pay their tax bills in the face of the cost-of-living crisis.
Late payment interest is payable on late tax bills, including:
- Income Tax
- National Insurance contributions
- Capital Gains Tax
- Stamp Duty Land Tax
The Corporation Tax pay and file rate also increased to 4.25 per cent.
What is HMRC repayment interest?
If your company or organisation pays too much Corporation Tax, HMRC will repay what you have overpaid and may also pay you interest on it.
The repayment interest rate has increased for the first time since 29 September 2009 to 0.75 per cent, up from 0.5 per cent.
Interest rates set in legislation
HMRC interest rates are set in legislation and are linked to the Bank of England base rate, so the rise is automatically triggered.
The Bank of England voted in favour of the 0.5 percentage point increase early in August.
This has since been followed by a further 0.5 percentage point increase following an additional meeting of the Bank’s Monetary Policy Committee in September.
As a result, the interest rates applied to tax debts will rise once again from 11 October to 4.75 per cent on late payment interest and 1.25 per cent on the repayment rate.
With further increases in interest rates likely in the months ahead, you need to carefully monitor the rate of interest paid on tax debts.
If you are concerned about your tax bill you must seek advice at the earliest opportunity to avoid significant penalties and interest. We are here to help, speak to us today.